Cars

Honda profit drops but beats estimate

Japan's second-largest automaker also hikes profit forecast

TOKYO (MarketWatch) -- Honda Motor Co. on Tuesday reported a 56% drop in net profit for the second quarter compared with a year ago, but its earnings beat analyst expectations amid strength in sales of fuel-efficient cars in Japan.

Honda
HMC, +1.02%
(7267) posted net income of 54 billion yen ($586.8 million) for the second quarter, down from 123.3 billion yen for the same quarter a year ago.

But analysts had expected to see a July-September net profit of just 43.86 billion yen, according to a mean estimate compiled by Thomson Reuters.

Consolidated net sales and other operating revenue for the quarter fell 27.2% from a year ago to 2.06 trillion yen because of decreased sales in the automobile business and unfavorable currency-translation effects, Honda said.

The company's automobile unit sales totaled 838,000 units, down 10.4% from the same period a year ago.

But in Japan, unit sales climbed 3.9% "due mainly to favorable sales of Insight, Zest and Fit -- together with tax breaks and incentives on fuel-efficient green cars," Honda said.

For the first half of the fiscal year, it posted a net income of 61.5 billion yen, down 79.2% from a year ago, as revenue fell 28.7%.

Operating income was at 90.7 billion, down 75% from a year ago.

But in late July, Honda had said it was expecting to see an operating loss of 10 billion yen for the first half.

The result also beat expectations from a report in the Nikkei newspaper the previous week, tipping the automaker to post a group operating profit of 60 billion yen for the April-September period.

The Nikkei report had also said Honda would likely be the only one of Japan's seven major automakers to turn a profit for the first half of the fiscal year. Toyota, Japan's No. 1 automaker, reports its financial results on Nov. 5.

Looking ahead, Honda expects to see a net income of 155 billion yen for the fiscal year ending in March 2010, with operating income to come in at 190 billion yen.

That was an improvement from the estimates the company provided in late July, when it forecast net income of 55 billion yen and operating income of 70 billion yen.

Ahead of the earnings results, Honda shares closed Tuesday with a loss of 1.9% in Tokyo.

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